US Cruise Line Industry Blocked From Federal Stimulus Package

While cruise lines have been battered by the coronavirus pandemic, the industry is excluded from the federal government’s $2 trillion stimulus package because these companies are incorporated outside the U.S.

With respect to the package’s $500 billion fund allocated for major employers, the bill states that to be eligible for financial aid, companies must be certified as “created or organized in the United States or under the laws of the United States” and have “significant operations in” and a majority of employees based in the U.S.

However, major cruise operators have based their companies overseas as a way of avoiding paying federal income taxes and some U.S. regulations. They also rely heavily on workers from the Philippines, Indonesia and India. Reportedly, only about 5% of cruise ship workers are U.S. citizens.

For example, Carnival Corp. (CCL), which owns the Princess cruise lines, is incorporated in Panama; while Royal Caribbean Cruises (RCL) is incorporated in Liberia, Africa; and Norwegian Cruise Lines (NCLH) in domiciled in Bermuda.

Cruise companies paid an average tax rate of less than 1%, well below the mandated 21% corporate tax rate in the U.S.

They do, however, pay state income taxes and port fees, according to The Wall Street Journal.

Some of Carnival’s Princess ships were also believed to have been partly responsible for the initial spread of the coronavirus into the U.S.

Some Democratic politicians particularly objected to offering loans to these companies since they are incorporated offshore.

Rep. Hakeem Jefferies (D-N.Y.), Chairman of the House Democratic Caucus and Member of the Judiciary and Budget Committees, tweeted: “The major cruise lines sail under foreign flags to avoid paying the U.S. corporate tax rate -- now some want the American taxpayer to bail them out? Get. Lost.”

The Cruise Lines International Association, the industry’s trade group, acknowledged they would be left high and dry.

“For the more than 421,000 people in the United States whose jobs are supported by the cruise industry, we will continue to work with policymakers to help our community recover from the impact of this pandemic,” said CLIA spokeswoman Bari Golin-Blaugrund.

However, some travel agencies, small firms and independent operators which are supported by the cruise industry might be eligible for financial relief from other parts of the stimulus bill, including $377 billion set aside to help small businesses.

However, some cruise lines might not even need a bailout to survive. Royal Caribbean recently secured a $2.2 billion credit facility to upgrade its finances.

Carnival chief executive Arnold Donald recently said: “We don’t need a bailout in terms of giving us money. Getting a loan guarantee would be helpful.”

Harry Curtis, an analyst at Instinet, wrote that the cruise companies have about a year of liquidity left.

Nonetheless, President Donald Trump, a longtime friend of Carnival CEO Micky Arison, has pledged to help the cruise industry.

“We are going to work very hard on the cruise-line business, and we are going to try to work something out,” he said. “[Cruise companies] have thousands and thousands of people who work there. The cruise line business is very important.”

Trump has suggested cruise companies might switch their corporate registrations stateside in order to qualify for aid under the stimulus bill. “"I do like the concept of perhaps coming in and registering here,” he said.

Sen. Josh Hawley (R-Mo.) tweeted in reference to cruise firms: “Come back to America. And pay your taxes. How about that?”

Last Sunday, Trump declared: “We can’t let the cruise lines go out of business.”